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Russia starts gradual oil output cuts as Opec+ deal kicks in

Mon, Jan 14, 2019 - 5:50 AM

Moscow

RUSSIA is gradually reducing oil production in line with the Opec+ deal and is on track to get about a fifth of the way towards its pledged cut this month.

Preliminary data show the country's output has already fallen by more than 30,000 barrels a day relative to October levels, its energy minister Alexander Novak said on Friday. "The companies have said they can decrease total production by 50,000 barrels per day in January," he told reporters in Moscow.

Russia has agreed with the Organization of the Petroleum Exporting Countries to gradually implement a cut of 228,000 barrels a day by the end of the first quarter, compared with October production of 11.418 million barrels a day. The country opened the taps before the restrictions began, pumping a post-Soviet record of 11.45 million barrels a day in December, meaning the month-to-month output drop will be steeper.

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In the Opec+ accord, Russia was allowed to make the cuts gradually since the harsh climate and complex geology of Siberia, its main oil province, prevent swift field shutdowns. In contrast, Saudi Arabia said it has already fully implemented its production cut and even gone a little deeper, pumping 10.2 million barrels a day.

Russia's reductions are modest compared with the cuts from some of its partners. In December - before the agreement to curtail supplies even started - Opec production plunged by 530,000 barrels a day, the most in almost two years. The Opec+ alliance agreed to trim output by a total 1.2 million barrels a day in the first half of 2019.

While the curbs have helped push benchmark Brent crude back above US$60 a barrel, prices remain about 30 per cent below their four-year high in early October.

The next meeting of the Joint Ministerial Monitoring Committee, which oversees implementation of the production cuts, may take place in April, although that date could change, Mr Novak said. BLOOMBERG